JAMIA MILLIA ISLAMIA

FACULTY OF LAW

ASSIGNMENT - CONTRACT- II

TOPIC:
NATURE, FORMATION AND TERMS OF
CONTRACT OF SALES OF GOODS

NAME : KRITIKA MALIK

SERIAL NO. : 27
COURSE : B.A.L.L.B. (HONS) REGULAR
SEMESTER :2

SUBMITTED TO-MS.RAMSHA TANWIR

 ACKNOWLEDGEMENT

I would like to express my gratitude to my teacher MS.RAMSHA TANWIR , who

gave me this wonderful opportunity to do this project of the subject CONTRACT-II
on the topic of NATURE, FORMATION AND TERMS OF CONTRACT OF SALES OF
SALES OF GOODS . I acknowledge the sincere support and efforts of my esteemed
and learned teacher and guide. This project helped to do proper research work
and I learned many new things while doing this project.

Lastly, I would like to thank all the staffs of the library, academic section and all
the members of JMI family for their full support and assistance.

THANKING YOU

KRITIKA MALIK
 INDEX

1. Introduction..................................................................................................4
2.Meaning of contract of sale of goods...........................................................4
3.Essentials of a valid contract of sales...........................................................4
4. Effects of goods perishing...........................................................................8
5.Formalities of contract of sale.....................................................................10
6.Difference between sale and agreement to sale...........................................10
7.Difference between sale and hire-purchase agreement ...............................12
8.Case laws......................................................................................................13
9.Conclusion ...................................................................................................15
10.Bibliography...............................................................................................16
 INTRODUCTION

Sale of goods is the most common transaction in business as well as in day-to-day life of
individuals. In law, it is regarded as a specific contract for which the Contract Act had made
special provisions. But, looking at the importance and the complexities of such contracts a
separate Act entitled 'Sale of Goods Act' has been enacted from 1st July 19301 and extends to the
whole of India except Jammu and Kashmir. Before 1930, the issues related to the sale of goods
were governed by Indian Contract Act 1872 under section 76-123, but these were not enough to
cover all aspects, so, the constituent assembly separated these sections and formulated a whole
new act in 1930 under the name, Sale of Goods Act 1930.

MEANING OF CONTRACT OF SALE OF GOODS

As defined under section 4(1) "a contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer for a price" (Section 4)

According to Blackstone, when ownership of any goods transferred in exchange for money, then
a sale have been made2. This contract can be absolute or conditional. When a person buys goods
outrightly it is considered as absolute but when a person buys goods on approval or trial basis
then it is termed as a conditional contract. The term 'contract of sale' is a generic term and,
therefore, broader than 'sale'. It includes 'sale' and 'an agreement to sell'. Where under a contract
of sale, the property in goods has passed from the seller to the buyer, it is called a 'sale', but where
the transfer of property in goods is to take place at a future time or subject to some conditions
thereafter to be fulfilled, it is an 'agreement to sell'. But one should remember that an agreement
to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the
ownership in the goods, is to be transferred (Sec.4(4)).

EXAMPLES :

i) A enters into a contract with B to buy 100 quintals of potatoes, from B's cold i I storage
for 8s. 2,000. It shall amount to a sale if the seller authorises A to come (1 to his cold
storage and take away the potatoes whenever A desires.

ii) A agrees to sell his scooter to B after ten days for Rs. 5,000. B agrees to buy it after ten
days, for 8s. 5,000. It is an 'agreement to sell' and it will become sale after ten-days. The
specific points of distinction between 'sale: and 'agreement to , sell' shall be discussed a
little later in this unit.

ESSENTIALS OF A VALID CONTRACT OF SALE

A contract of sale is a special type of contract, therefore all the essentials of a valid contract must
be fulfilled. If any of the essential element of a valid contract is missing, then the contract of sale
will not be valid. For example, A agreed to sell his scooter to B without any consideration. This
contract of sale is not valid since there is no consideration.
1 "Welcome to Juris World". Jurisworld.in. Retrieved 28 January 2019.
2 Pandey, Nitya Nand (30 September 2018). "3. Definition clause". Docs.google.com. Retrieved 28 January 2019
 From the definition of Contract of Sale as per Section 4 of the Sale of Goods Act, the following
essential features may be noted.

1. BILATERAL
According to Pothier,a sales need to be consensual, bilateral and commutative.There must be two
parties, one seller and the other buyer.As per the sec 2(1) of the Act, a buyer is someone who
buys or has agreed to buy goods. and a seller is someone who sells or has agreed to sell good 3..
Also a person can not contract with himself. For example, X is the owner of certain goods, but he
is not aware of this fact. A pretends to be the owner of the goods and sells them to X. There is no
sale, for X cannot buy goods which are already his own. (Bell v. Lever Bros. Ltd.) However, a
.part-owner may sell to another part-owner (Section 4).
Partners are not regarded as separate persons for the purpose of sale of the partnership property.
They are the joint owners of the goods and as such they cannot be both seller and buyer. But a
partner may buy goods from the firm or sell goods to the firm.
Thus, in a contract of sales a property has to be passed from one person to another, a person
cannot buy his own property this was held by the supreme court in case of Gujrat V Ramanlal
And Sakalchand, where on dissolution of a partnership firm surplus assets and goods were
divided among partners in specie, the sales tax officers sought to tax this but the court said that no
money consideration was promised or paid by any partner to the firm as consideration for goods
they can not be both buyer and seller of goods.
The element of consensuality is important because parties should agree with their free consent, a
forced purchase is an acquisition not sales. Similarly, when a property is compulsorily acquired in
accordance with the rules in accordance to an authority given by statute there is no sale of the
property, despite the fact that compensation is payable its price can be fixed by negotiation. For
instance, the supply of electricity, gas, water, essential medicines by the government cannot be
considered as a sale.

2. MONEY
One of the essential element that separates sale from merely an exchange(barter) or gift or
donation, is the price of goods and no sale can take place without price. Herein, price means
consideration in terms of money. When the goods are sold for some price as well as in terms of
goods, that will be considered as a sale not barter.
For example, in, Aldridge V Johnson fifty-two bullocks worth 6$ each were sold for 100 quarters
of barley at 2$ per quarter, the difference has to be made up in cash, was treated as a contract of
sale.
In another case Cit V Motor And General Store, an old car was returned to the dealer in exchange
for a new car and the difference was paid in cash was considered as a sale by a court of law.

3. PRICE
One of the essential element that separates sale from merely an exchange(barter) or gift or
donation, is the price of goods and no sale can take place without price. Herein, price means

3 New India Ass. Co. Ltd. V TH devakumar , A.L.R.1996 Kant. 345, at 349
consideration in terms of money. There are three essential elements of price:
1- It should be in terms of money.
2- It should be definite.
3- It should be realistic.
In order to make sure all these essentials are met, there should be an ascertainment of the price
which can be done in many ways, as per section 9 and 10 of Sales of Goods Act 1930:
•Contract- one of the basic method of ascertaining price is directly mentioning it in the
contract of sale of goods. Reasonability of price does matter to the court of law. Seller and
buyer can any price which is to be paid by the buyer to the seller.
•A course of mutual dealing- in case there is no price or particular method to set price is
laid down in the contract, it can be set by course of dealing between the parties through
mutual understanding.
•Fixing a reasonable price– according to law of the land, when no price is set in the
contract of sale of goods, at the time of execution of the contract the buyer must pay the
reasonable price which is subjective and depends upon the circumstances of the case.
•Fixing it in the manner agreed- price can also be set by any manner that is agreed in the
contract.
•Fixing by third-party- acc to section 10, buyer and seller of the goods can also include the
third party to ascertain the price of goods, but if the third party fails to do so, the contract
becomes void. In case there has been any transfer of goods than the buyer has to pay a
reasonable price.
For example, L has 5 cars. He enters into an agreement to sell 4 out of 5 cars to Z if A ascertain
the price of all 4 cars. But A does not ascertain the price but 2 cars have been delivered to Z. in
this case Z has to pay the reasonable price to L. For the rest 2 cars it entirely depends upon L and
Z, if they want to proceed or not.
Apart from this when a certain part or full price is paid in advance by the buyer to the seller as a
part of his performance, it is known as earnest money or security. This amount is adjusted against
the cost of goods at the time of completion of the contract. In case there is a default on the part
any party the other party has a right to ask for a refund of that amount.

4. GOODS
The dictionary meaning of the term goods is merchandise or possession. The term “Goods” is
one of the crucial clauses in the Contract of Sale.
According to Section 2(7) of the Act, “goods” include-
•Any movable property except actionable claims and money;
•Stock and shares;
•The growing crops, standing timber, grass;
•The things that are attached or forming part of the land which is agreed to be severed
from the land before the sale. It has been held in the State of Maharashtra v. Champalal
Kishanlal Mohta that things which are attached to land are the subject matter of the
contract of sale if they are severed before the sale.
For eg: A resort was offering stay along with food at a consolidated charge. If customers do not
take food, the rebate on food is not allowed as the supply of food does not come under the
definition of “goods” as per the Act.4
It is concluded from the above definition that the Act deals with the sale of goods i.e. movable
property only. On the other hand sale of immovable property is governed by the Transfer of
Property Act,1882. It is noted that the actionable claims and money are excluded from the ambit
of the definition. Actionable claims are the claim or debt for which legal action can be taken and
can be enforced. For eg: recovery of refund is an actionable claim and is not included in the
purview of the above definition. Further, the goods can be classified under several categories as
mentioned below as sub category.

Also in , Mp v Orient Paper Mill court held that standing timber is a movable property if under
any contract it has to be severed but the severance should take place when timber still vest in
contracting parties, goodwill, trademark, patent, copyright, ancient/rare coins all can be termed as
goods except immovable property, broadband is sale (Airtel V Karnataka), Software St Albans
City And District Council v International Comp Ltd in this case, The appellant was the defendant
company which had supplied computer software to the respondent, and for which the respondent
had been awarded £1.3 million.
The software had overestimated the number of community charge payers in the council’s area
with the result that there was a shortfall of £484,000 in revenue from the charge. The additional
effect was that the council had to pay an increased precept to the county council of £685,000. It
was held that a distinction should be drawn between the precept payment, which only arose
because of the fault in the software and the community charge shortfall which formed an ongoing
obligation which the council had always been subject to and therefore was held not to be
recoverable.
Types of goods
According to section 2(7) of the sale of goods act 1930, every moveable property other than
actionable claims and money is considered as goods. An actionable claim is something which a
person cannot use or enjoy but which can be recovered by him through a suit or an action in the
court of law, for example, a debt due to a person from another. Stocks, shares, growing
crops(separated), goodwill, trademark, patent, copyright, ancient/rare coins all can be termed as
goods except immovable property.
Section 6 sale of goods act bifurcates goods into 3 types: existing goods; future goods; contingent
goods.

Existing goods
At the time of making the contract, ownership or possession of the goods is under the authority of
the seller and after fulfilling the obligations of the contract seller has all legal rights to transfer
the ownership or possession of those goods to buyer, those goods are known as existing goods
under section 6 of the sale of goods act. Existing goods may be classified as:

Ascertained goods
There are certain kinds of goods which need to be identified at the time of making the contract,
those goods needed to be selected specifically are also known as specific goods. From a lot of
unascertained goods when a specific quantity is set aside after making the contract of sales, it will

4Mercantile Law by Areeb Shamsi.

be considered as specific goods.
For instance, A enters into an agreement with B to sell a car, at that A was having 5 similar
looking cars, when B specifically chooses a car of a particular from an unascertained lot of 5
cars, then the selected car will be considered as ascertained goods.

Unascertained goods
The goods which are not identified specifically but are indicated by description or sample from a
lot of goods are known as unascertained goods. For instance, A enters into an agreement with B
to sell a car, at that A was having 5 same cars, when B does not specifically choose a car but
gives the description of car which includes colour, then it will be considered as unascertained
goods.

Future goods
The goods which made or acquired or produced on demand of the buyer and does not exist at the
time of making the contract are known as future goods. These types of goods is not a contract of
sale but agreement to sale because the essential condition of existence of goods is not fulfilled
and seller cannot transfer which is not yet produced.

Contingent goods
These goods are the type of future goods, the acquisition of which by the seller is dependent on a
contingent event which may or may not happen. The contract is not a sale but an agreement to
sell.For instance,when A proposes to sell his car to B if and only if A’s brother returns from
England and return his car.

Effect of Goods Perishing

1. Goods perishing before making of contract

According to Section 7:

Where there is a contract for the sale of specific goods, the contract is void if the goods without
the knowledge of the seller have, at the time when the contract was made, perished or become so
damaged as no longer to answer to their description in the contract.

Where there is a contract for the sale of specific goods, i.e., the goods which have been identified
and agreed upon at the time a contract of sale is made5, there is deemed to be an implied
condition
that the goods bargained are in existence. If there is a failure of this condition, the specific goods,
which form subject-matter of the contract, have perished or become so damaged that they no
longer answer to their description in the contract, "the contract is void." This provision is not
applicable when the contract is not for the sale of specific goods but for unascertained goods.
Thus, if A agrees to sell to B 1,000 bags of cement lying in his godown and unknown to A the
whole of the cement has been damaged by rain water, the agreement is void. When the subject-
matter has perished at the time of making of the contract, the performance of the contract is
impossible, and, therefore, such an agreement is void6. Similar would be the effect when there is

5 Sec 10 (2)
6 Section 56 , Indian Contract Act
a common mistake as to the existence of the subject-matter of the contract.

In case of an agreement, which is void, both the parties would be excused from performing their
obligations. If any party has received any advantage under such an agreement, he is bound to
restore it, or to make compensation for it, to the person from whom he received it.7

For the application of the above stated provision, the specific goods, which constitute the subject-
matter of the contract of sale, should perish or be damaged in such a way that they no longer
answer to their description in the contract. For example, if there is a contract to sell a particular
horse, and unknown to the seller the horse was dead at the time of making of the contract, the
contract is void. Similarly, when there is an agreement to sell 100 bags of cement lying in the
seller's godown and if unknown to the seller the cement had become converted into stones by
rains at the time of the contract, the agreement is void, as the cement no longer answers to its
description given in the contract. In case of Asfar v. Blundell8, the dates which had been damaged
by wetting and contamination were held to have ceased to exist in commercial sense. Similarly,
the goods which have been stolen without any possibility of being recovered back are deemed to
have been perished for the purpose of the above stated provision9.

2. Goods perishing before sale but after agreement to sell

According to Section 8, when there is an agreement to sell specific goods and subsequently the
goods without any fault on the part of the seller or buyer perish or become so damaged as no
longer to answer to their description in the agreement before the risk passes to the buyer, the
agreement is thereby avoided. This provision is applicable when the goods sold are specific and
there is merely an agreement to sell. In such a case, if the goods perish or are damaged to such an
extent so that they no longer answer to their description in the agreement, and such loss or
damage occurs without any fault on the part of either of the parties and before the risk passes to
the buyer, the agreement is thereby avoided.

Section 8, it may be noted, deals with a contract which is valid when made but becomes void
from the time when the goods perish or get damaged. Moreover, under this section, the contract
will be avoided if the goods perish, etc. after making an agreement to sell and before sale. If there
has been a sale, i.e., the property in the goods has passed to the buyer or the risk has passed to the
buyer, the contract will not be avoided. Thus, if a buyer took a horse on a trial for 8 days and the
horse died within the period without any fault of the buyer, the contract, which was in the form of
an agreement to sell, became void and the seller could not recover the price of the horse from the
buyer'

3. Amount of increased or decreased taxes to be added or deducted (Sec. 64A)

According to Sec. 64A: 64A. In contracts of sale, amount of increased or decreased taxes to be
added or deducted.-(1) Unless a different intention appears from the terms of the contract, in the
event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or
remitted in respect of any goods after the making of any contract for the sale or purchase of such
goods without stipulation as to payment of tax where tax was not chargeable at the time of the
making of the contract, or for the sale or purchase of such goods, tax paid where tax was
chargeable at that time,

7 Section 20 , Indian Contract Act .

8 (1896) 1 Q.B. 123
9 Barrow , Lane and Ballard v. Philip , Philip and Co., (1929)
(a) if such imposition or increase so takes effect that the tax or the increased tax, may be, or any
part of such tax is paid or payable, the seller may add so much to the contract price as will be
equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be
entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission
so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the
buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or
remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2)
The provisions of sub-section (1) apply to the following

taxes, namely,
(a) any duty of customs and excise on goods
(b) any tax on the saleor purchase of goods

FORMALITIES OF CONTRACT OF SALES

A contract ohsale
f is regulated by the general law of contract. Accordingly, there must be an cffer
to buy or sell goods and an acceptance of that ofier, parties must be competent to contract and
there should be free consent. The subject matter of stch contract is goods the property in which is
transferred or is to be transferred for a money consideration called the price-paid or promised to
be paid. As per Section 5 of the Sale of Goods Act, a contract of sale may be made in any of the
following modes:
i) There may be immediate delivery of the goods;
ii) There may be unrnediate payment of the price but the delivery to be made at some future
date;
iii) there may be immediate delivery of goods and also immediate payment of price;
iv) It may be agreed that the delivery or payment or both are to be made in instdmtnts; or
v) the delievery or payment or both may be made at some future date.

Except where specially provided by some law for the time being in force, no specific,
formalities are required to constitute a valid contract of sale of goods. However, the buyer
and the seller should mutually agree for the transfer of property in goods. A contract of
sale may be express or implied from the conduct of the parties and in the case of express
contract, it may be oral or in writing or partly in writing and partly by wards of mouth.

A written offer to sell goods may be accepted verbally or by writing, similarly, a verbal
offer may be accepted in writing. In case of a contract made with a company, the contract
may have to be in writing.

SALE AND AGREEMENT TO SALE

While entering into a contract of sale when the property is transferred from buyer to seller, it is
considered as sales but when some contingent condition is to fulfilled or any future time is
decided to transfer the property it is known as an agreement to sell. Under a contract of sales jus
in rem i.e. right against property, is transferred whereas in agreement to sale jus in personam i.e.
right against a person, is created. The only remedy available in case agreement to sell is
unliquidated damages unlike a contract of sales where either of the party can sue in case of
default. The case of sale the risk of loss is transferred to the buyer but in the agreement of sale,
the risk is on the seller.
For instance, A offers B to sell 10 Maruti cars for Rs 10 lakhs if the price of Maruti cars in the
market falls. This is an agreement to sell but if there was a simple agreement to sell Maruti cars
for Rs 10 lakh without any contingent condition, it will be a contract of sales.
An agreement to sell becomes sale as per clause 4 of section 4, when the conditions are fulfilled
or on the arrival of future time which is decided. Property is to be transferred after agreement to
sale has became sale. This can clearly be understood by case of Wood V Manley, where, the sale
of the whole of the haystack on the seller’s farm the buyer has liberty to take away whenever he
likes is an immediate sale but in White V Wilks, where, contract to sell a portion of oil from
seller’s cistern is considered as an agreement to sell.

Other points of distinction between the two may be noted as under :

1 A 'sale' is an executed contract whereas an agreement to sell is always an executory contract.
Executed means that the ownership of the goods has been transferred to the buyer, while
executory means that something remains to be done i.e., ownership shall pass on some future
date.

2 An agreement to sell is a contract, pure and simple, and creates merely jus in personam, i.e.,
gives a right to either ,buyer or seller against the other for any default in fulfilling his part of the
agreement. A 'sale' is a contract plus conveyance, and creates jus in rem, i.e., gives right to the
buyer to enjoy the goods as against the whole world including the seller.

3 In a sale, if the buyer wrongfully refuses to accept the goods, and pay theSprice, the seller can
sue for the price, even if the gods are in his possession and he can exercise the right 'of lien,
stoppage of goods in transit and of resale. But in an agreement to sell only remedy available to
the seller is to sue for damages if buyer fails to accept and,.pay for the goods. For example, A
sells ten bags of rice to B for Rs. 3,000. If B refuses to accept the goods, A can file a suit against
B for price even though the goods are in A's possession. But instead if it was an agreement to sell,
then A's only remedy is to claim damages from B because the ownership has not yet passed tb B.

4 In an agreement to sell, the seller being still the owner, he can dispose of the goods as he likes
and the buyer's remedy against the seller's breach is a suit for damages. For example, A agrd to
sell a particular horse to B for Rs. 5,000. Subsequently A sells the same horse to C for Rs. 6,000.
B's remedy is to claim. damages from A. B cannot recover the horse from C. In a 'sale' breach by
the seller gives the buyer a double remedy; a suit for damages against the seller, and the right to
follow property in the hands of the subsequent buyer. Thus in sale if the goods are resold, the
buyer can recover them as the owner from the subsequent purchaser. If, in th& above example
where A sells a particular horse 8 to B for Rs.-5,000 and sfibsequently it is sold to C for Rs,
6,000, B shall have the right to recover the horse from C, because at the time of sale A was no
longer the owner of the said horse. B can also claim damages from A for wrongful conversion.

5 'Risk follows ownership' is the golden rule i.e., whosoever is the owner of the goods at the time
of loss, will bear the loss. In case of 'sale', if there is any loss to the goods, the loss will fall on the
buyer, even though the goods are in the possession of the seller. On the other hand in case of an
agreement to sell', the loss shall be borne by the seller, even though the goods are in the
possession of the buyer. It is because, ownership in case of agreement to sell continues to vest in
the seller.

6 Insolvency of the seller: If in a sale the seller becomes insolvent while the goods are still in his
possession, the buyer shall have a right to claim the goods from the official Receiver or Assignee
because the ownership of poods has passed to the buyer. However, in case of an agreement to
sell, the buyer cannot claim the goods even when he has paid the price. Buyer's only remedy in
this case is to claim rateable dividend for the money paid from the estate of the insolvent seller.

7 Insolvency of the Buyer: In case of sale, if the buyer becomes insolvent before paying the price,
the ownership having passed to the buyer, the seller shall have to deliver the goods to the Offlcial
Assignee or Receiver. For the unpaid price, the seller will rank as an unsecured creditor and
thereby entitled to rateable dividend out of the estate of the insolvent buyer. In case of an
agreeient to sell, where the seller continues to be the owner of the goods, the seller can refuse to
deliver the goods to the Official Assignee or Receiver unless he is paid full price of the goods.

SALE AND HIRE-PURCHASE AGREEMENTS

A transaction of sale has to be distinguished from another apparently similar but different
transaction, called hire-purchase 'agreement'. A hire purchase agreement is an agreement under
which the owner delivers his goods on hire basis to a person called 'hirer' and the hirer has the
option to buy the goods by paying the agreed , amount in specified instalments. The hirer, under
this agreement, is required to pay every rnonth a particular sum of money, and if he pays in that
way for an agreed number of montl~s, the hirer will become the owner of the goods on the
payment of the last instalment
But if the hirer fails to pay any particular instalment, the owner can terminate thg contract and
take away the goods because the ownership continues to remain with him. The hirer has two
option:
i) he may buy the goods after paying all the agreed instalments or
ii) he may return the goods at any time. In case he decides to return the goods he shall not
be liable for further payment of instalments, the amount already paid is treated as hirk
charges for the use of goods.

A hire purchase agreement, therefore, entitles the hirer only to possession of the goods.
He cannot accordingly pass a good title to any buyer from him. A hire purchase agreement
is distinct from 'sale' in which price may be payable by . instalments. In case of sale, the
property in goods passes as soon as the contract is made, though price may not yet have
been paid. A hire-purchase agreement, on the ojher hand, does not result in passing of the
property unless the option to purchase is exerckd, usually by payment of all the
instalments. Till such time, it continues to be a bailment. Thus, it is primarily the option
on the part of the hirer to buy or to terminate the hiring that marks the distinction.

In K.L. Johar & Co. v. Dy. Commercial Tax Officer, the Supreme Court observed as
follows: he essence Of a sale is that the property is transferred-from the seller to the buyer
I.i)r a price, whether paid at once or paid later in instalments. On the other hand, a
 hirepurchase agreement has two aspects. There is first an aspect of bailment of goods
subject to the hire-purchase agreement, and there is next, Bn element of sale which
fructifiei when the option to purchase is exercised by the intending purchaser.

It should be noted that in a contract in which the person taking the ,goods does not have
the option to return the goods. it will bc an 'agreement to buy' and not an agreement of
hire-purchase, even though the price is payable in instalments and the seller has the power
to take the goods back in case of default. In Les v. Butler, a lady hired certain furniture
from the plaintili. The contract provided that the hirer has no option to return the goods
and owner can take thc furniture back if any instalment was not paid. Before the last
instalment was paid, the lady sold the furniture to the defendant. It was held, that the
defendant had acquired a good title, the lady being in possession of the furniture under an
'agl.cernent. to buy' and not under an agreement of 'hire-purchase', because the lady did
not have the option to return, but was under compulsion to buy.

Thus, in case of sale of installment, the buyer cannot terminate the contract and as such is
bound to pay the price of the goods. The hire-purchaser, on the other hand. has an option
to terminate the contract at any stage and cannot be forced to pay the further instalments.
Further, if the agreement is an agreement to sell and under it if the buyer obtains
possession of the goods, with the consent of the seller, he can validly sell or pledge the
goods and thereby give the transferee or pledgee a good title on the goods provided they
have acted in good faith. However, in a contract of hire purchase, the hirer cannot transfer
ownership to such buyer even if the latter acts ih good faith, because the position of the
hirer is that of a bailee only. He becomes the owner when aU ll the insta'sinents
llm arc.
e paid. In
this connection the following points should also be noted:

i) A hirer cannot claim the benefit of implied conditions and warranties unless it becomes
a sale. However, conditions implied under Hire purchase Act, 1972 do apply.

ii) Sales-Tax is not leviable on a hire-purchase until it becomes a sale.

iii)A contract of sale may

inay be made orally or in writing, but the hire-purchase agreement
must be in writing.

SOME IMPORTANT CASE LAWS RELATED TO SALES OF GOODS

1) New India Sugar Mills Ltd. V. Commissioner of sales tax Bihar10 :-

The Supreme Court was considering a case under the sugar products control order 1946. The
order prohibited the producers of sugar from disposing of or agreeing to dispose of or to make
delivery to anyone except to or through a recognized dealer.

Under clause 5 of the said order, every purchaser or dealer was required to comply with
directions regarding production, sales, stock or distribution as may be given from time to time by
the controller.

The contravention of any provision s of the order was made penal . under the said order , the

10 1963 AIR 1207, 1963 SCR Supl. (2) 459

controller made allotments to the various states and addresses orders to factory owners to supply
sugar to the states in accordance with the instructions received from the state government. New
India sugar mills having supplied sugar under the said order to the state of madras , the state of
Bihar attempted to tax the transaction as a sale.

The majority held that a contract of sale postulated the exercise to volition on the part of the
contracting parties, and there was no such exercise of volition in complying with the orders
passed by the controller. The court negated the view that such transactions amounts to sale.

Justice Hidaytullah’s dissenting view:- Judgment in this case was that this type of transaction
can’t be taxed as they do amount to sale but HIDAYATULLAH J. in a dissenting opinion ‘ Struck
the new path’

2) Andhra sugar ltd v. state of U.P.11 :-

In this case under A.P. sugarcane (Regulation of supply and purchase) Act 1961 the sugarcane
grower was free to make or not to make an offer of sale of sugarcane to occupier of the factory
but letter was bound to accept the offer, if made by sugarcane grower. In spite of such legal
compulsion upon occupier of factory to enter in to an agreement, their agreement, according to
the supreme court was valid and enforceable as the consent of occupier of factory is not vitiated
by any of the vitiating elements .

To constitute a sale under the sale of goods act there must be an agreement for sale of goods for a
price and the passing of property pursuant to agreement which conditions were satisfied in the
facts of Andhra sugar case

The Supreme Court emphasized that unlike New India sugar mills case her the cane grower
directly made an offer to director of factory directly and the latter accepted though under
compulsion of law but a direct privity between parties was established.

Thus this case followed dissenting opinion of Hidaytullah J.

SOME RECENT CASE LAWS

3.Skill Lotto Solutions Pvt Ltd. vs Union Of India on 3 December, 2020

In the above case this Court had occasion to consider Entry 48 in List II in Schedule VII of
the Government of India Act, 1935 that is “Taxes on the sale of goods”. The Madras
General Sales Tax Act, 1939 was amended by the Madras General Sales Tax (Amendment) Act,
1947 introducing several new provisions. Section 2(c) of the Act had defined “goods” as meaning
“all kinds of movable property other than actionable claims, stocks and shares and securities and
as including all materials, commodities and articles”. The provision was amended and so as to
include materials “used in the construction, fitting out, improvement or repair of immovable
property or in the fitting out, improvement or repair of movable property”. The definition of
“sale” in Section 2(h) was also enlarged so as to include “a transfer of property in goods involved
in the execution of a works contract”.

4.Mr.Vijay Mohan vs M/S. Real Blue International Pvt. on 15 December, 2018

11 1968 AIR 599, 1968 SCR (1) 705

In this case, the learned counsel for the Real Blue has very much relied upon certain provisions of
the Sale of Goods Act, 1930 especially, Section 18, Section 23, Section 25 and Section 33 as well
as Section 39.
The law is well established that in the case of contract for sale of unascertained goods the
property does not pass to the purchaser unless there is unconditional appropriation, of
the goods in a deliverable state to the contract. In the case of such a contract, delivery of
the goods by the vendor to the common carrier is an appropriation sufficient to pass the property.
But there is a difference in the legal effect of delivering goods to a common carrier on the one
hand and shipment on board a ship under a bill of lading on the other hand, where goods are
delivered on board of a vessel to be carried, and a bill of lading is taken, the delivery by the seller
is not delivery to the buyer, but to the captain as bailee for delivery to the person indicated by the
bill of lading. The seller may therefore take the bill of lading to his own order. The effect of this
transaction is to control the possession of the captain and make the captain accountable to deliver
the goods to the seller as the holder of the bill of lading.

CONCLUSION

A contract of sale of goods is a specie of contracts but since a distinct legislation, viz., Sale of
Goods Act regulates it, the transactions relating to sale and purchase of goods fall within the
purview of the Sale of Goods Act. However, where 'specific provisions are not available in this
Act, the provisions of Indian Contract Act shall apply.
Contract of sale of goods may take the shape of sale or an agreement to sell. The two have
different legal implications. Sale should also be distinguished from contracts for work and labour
and the hirepurchase agreements. 1Thehe subject-matter of a contract of sale, is 'goods'. Goods,
generally, mean movables other than actionable claims and money. Certain items have, however,
been specifically included in goods. These are stock and shares, growing crops, grass and things
attached to or the land which are agreed to be severed before sale or undqer the ilgreement
a of sale.
Goods may be existing goods, future goods or contingent goods. contract of sale of goods
becomes void on the destruction of goods provided certain conditions are satisfied .
 REFERENCES

1. R.K Bangia, Law of Contract II, 7th edition

2. THE SALE OF GOODS ACT, 1930 ( BARE ACT)
3. indiankanoon.org
4. Pollock & Mulla - The Sales Of Goods Act, 2017